Charting a new course in bilateral relations, India and Nepal agreed Monday to “review, adjust and update” the 1950 Treaty of Peace and Friendship to “better reflect the current realities” and expand ties in “a forward looking manner”.

This agreement between Prime Ministers Narendra Modi and Sushil Koirala was announced as Modi wrapped up his two-day visit to Nepal, the first in 17 years by an Indian Prime Minister, and headed home.

To address Indian concerns over the use of Nepalese territory for terror activities directed at India, Modi and Koirala directed authorities on both sides to ensure that “the open border, a unique feature of Nepal-India bilateral relations, is not misused by unscrupulous elements posing security threats to either side”.

Both sides agreed to finalise the texts of an extradition treaty and mutual legal assistance treaty at an early date. Officials were directed to expedite the signing of a memorandum of understanding on a police academy.

A joint press statement issued at the end of Modi’s visit said the two Prime Ministers underlined the need to explore ways to enhance sub-regional cooperation, particularly in the areas of trade, transit, connectivity and hydropower.

They said “high level visits are vital for greater momentum to the close and cordial ties” between the two countries. Modi invited Koirala to India at an early date and the latter “appreciated the enhanced focus and priority” given by the new Indian government on relations with neighbouring countries. He referred to Modi’s invitation to the SAARC leaders to attend his swearing-in ceremony in May, saying “this provided a unique opportunity for meaningful dialogue at the political level as well as for advancing regional cooperation under the framework of SAARC”.

The two Prime Ministers also underlined the need to resolve pending India-Nepal boundary issues once and for all. They welcomed the formation of the boundary working group (BWG) to undertake the construction, restoration and repair of boundary pillars, including clearance of ‘no-man’s land’ and other technical tasks.

They asked officials to expedite construction of cross-border railway at all five agreed border points and the four integrated check posts (ICPs) to facilitate trade and transit as well as Nepal’s export to and import from third countries.

On Nepal’s request, the Indian side agreed to take up the project for the construction of the Raxaul-Amlekhgunj petroleum pipeline in the first phase and extend it to Kathmandu in the next phase to facilitate the transport of petroleum products.

The Prime Ministers endorsed the joint commission’s decision — the commission was reactivated after 23 years on July 26 when its meeting was co-chaired by External Affairs Minister Sushma Swaraj and her counterpart Mahendra Bahadur Pandey in Kathmandu — to direct the Foreign Secretaries to work on the outstanding boundary issues, including Kalapani and Susta.

The Indian side stressed on early signing of the agreed and initialed strip maps of about 98 per cent of the boundary. The Nepalese side expressed its desire to resolve all outstanding boundary issues.

Expressing concern over the slow pace of implementation of several projects under bilateral economic cooperation, the Prime Ministers directed authorities to conclude negotiations within 45 days on the power trade agreement between the two countries and the project development agreement between the Investment Board of Nepal and GMR Group of India for the development of the Upper Karnali hydropower project.

They called for early conclusion of three other project development agreements — Arun III, Upper Marsyangdi and Tamakoshi III. They said development of projects of this size will be a major catalyst for tapping Nepal’s enormous hydropower potential.

On a Nepalese request, the Indian side assured assistance in the construction of a multi-lane motorable bridge over the Mahakali river at Mahendranagar which will allow traffic along the East West Highway to cross over the Mahakali. It will open a key trade and transit linkage between the far western region of Nepal with Uttar Pradesh, Delhi and Uttarakhand. The Indian side also suggested construction of motorable bridges at Jhulaghat and Darchula border points.

With the two Prime Ministers expressing satisfaction over defence cooperation, the Nepalese side requested Modi for waiver of dues on account of defence purchases.

Nepal said the countervailing duty being levied by India on Nepalese exports, including readymade garments, copper, brass utensils, kattha and other products, has had a negative impact on key Nepalese exports to India and asked the Indian side to remove it. It also requested removal of quantitative restrictions on four Nepalese exports — vegetable fats, copper products, acrylic yarn and zinc oxide. While assuring it would consider the requests, India said the problem of trade deficit could be best bridged by development of hydropower in Nepal and export of surplus power to India.

Nepal requested India to allow three additional air entry points at Janakpur, Bhairahawa and Nepalgunj, and cross border direct routes to facilitate direct flights between regional airports Pokhara-Bhirahawa-Lucknow as this would save time and cost for air travellers and also improve air connectivity between India and Nepal. The two Prime Ministers directed officials to meet within six months and resolve this issue.

Before leaving for Delhi, Modi called on President Ram Baran Yadav and met Nepal leaders, including Pushpa Kamal Dahal ‘Prachanda’, chairman of the Communist Party of Nepal (UML), K P Sharma Oli and leaders of Madheshi parties.